FED outlook, OECD forecasts, EU vs Britain

The main event of yesterday was the announcement of the results of a two-day meeting of the Federal Open Market Committee. The monetary policy parameters did not change, but the markets were expecting for this. All attention was focused on updated forecasts of US economic growth. Recall that the Central Bank gave the latest assessments back in December 2019.

FED gave another reason for the bulls in the US stock market to think about the state of the US economy again. The Fed's forecasts turned out to be very gloomy: a decrease in US GDP by 6.5% in 2020.

Note that the Fed is not alone in its pessimistic assessments. Yesterday we wrote about rather gloomy forecasts for the future of the global economy in 2020 from the World Bank, and another respectful organization OECD (Organization for Economic Cooperation and Development) has published its latest forecasts for the global economy. They turned out to be even more pessimistic. If the World Bank expects the world economy to decline by 5.2%, then the OECD expects a decrease of 6% (at best) or 7.6% if the second wave of the epidemic follows.

The US economy in a best case scenario will shrink by more than 7%, and the UK economy by 11+%. In this light, we recall our recommendations “sell” in the US stock market and “sell” pounds in the foreign exchange market.

Speaking of the pound. The EU’s chief Brexit negotiator yesterday walked very hard on Britain’s position in the negotiation process. In short, his idea boiled down to the fact that Britain wants to have all the advantages of an EU member, but not have any obligations of an EU member. In recent years, since the referendum and the mass of negotiations between Britain and the EU, this is perhaps the most aggressive statement by the European Union. So, the question of the "hard" Brexit is not so hypothetical. If Britain continues to stand its ground, it risks being left with nothing.